The 3-year-old boy found dead in a Gore wastewater treatment pond on Tuesday night had been seen walking along nearby Salford St hours earlier, a resident said.
Police have yet to release the boy's name.
His family, through police, have asked that their privacy be respected.
Police said they were alerted to the child's disappearance at about 9.30pm on Tuesday.
The child was found in the pond about 11.15pm after a search by residents, police and LandSAR.
They were unable to resuscitate the child.
Residents said no one thought anything of seeing a youngster on the road as children were always on Salford St.
"We actually saw the wee boy run past the house. I didn't think much [might be] wrong," resident Ken Merrett said.
"There's always kids up and down the road. And then one of the neighbours said 'Have you seen such and such kid?' And then the next thing was there were more neighbours out."
Merrett said his two daughters, aged 10 and 6, told him they had seen the boy going past the house wearing what they described as a police helmet.
Another resident, who spoke on condition of anonymity, said: "Everybody was out. They even went to the A&P showgrounds.
"We went up and down looking in ditches and everywhere."
She said no one initially thought about going to check at the wastewater works.
From the toddler's Salford St home to the treatment plant is several hundred metres of paddock bounded by a fence and a gate at Grasslands Rd.
Merrett said once it had emerged a child had drowned, the mood was "pretty subdued".
"The longer it went on, you knew this was not possibly going to end well."
Gore District Council chief executive Steve Parry has asked for a review of fencing and security around the ponds.
"It is very difficult to determine what happened."
He said the gates were normally padlocked and there was a fence to keep stock out.
The toddler, he understood, was found in the plant's second oxidation pond.
From this pond water receives ultraviolet treatment before being released into the Mataura River.
"It's taken us by surprise. How does a child scale a fence like that?"
Gore Mayor Tracy Hicks also confirmed a review of the plant and its associated ponds had been initiated.
Investigators from WorkSafe NZ were seen at the wastewater treatment plant and later at the toddler's home, which is about 800m from the second oxidation pond.